Physicians Mutual Offloads Card Processing Into the Cloud

Physicians Mutual leverages a SaaS-based accounts receivable solution to meet PCI and NACHA compliance requirements for securing customer credit card and bank account data by moving it into the cloud.

When a new billing and collections system touched off an 850 percent spike in credit card payments in 2008, Physicians Mutual Insurance Co. was driven to explore better ways to handle card data. "At the time, card processing occurred as a service through our bank," explains Roger Moeller, VP and enterprise architect at the Omaha-based health and life insurer. "But by late 2008, it was apparent we needed more sophisticated and streamlined processes."

In addition to PCI compliance, Physicians Mutual ($2.9 billion in total assets) sought a NACHA-compliant solution as well. But available packaged and outsourced options were either insufficient or cost-prohibitive, according to Moeller, who says the insurer began establishing plans for building its own dedicated, secure and encrypted environment.

Although the initial phases of the in-house build were well along by mid-2009, Moeller reports, Physicians Mutual changed course when it learned about a new SaaS-enabled option: ETran from Omaha-based Financial Transmission Network Inc. (FTNI). ETran's most important attribute was enabling the removal of all transaction data -- and related sensitive customer information -- from the insurer's systems, Moeller says.

During negotiations with FTNI, however, Physicians Mutual realized that it also needed an internal payment centralization system to link various legacy systems that had evolved over time. So in January 2010, Moeller relates, the 190-person IT staff at Physicians Mutual kicked off two initiatives -- the FTNI implementation and development of an in-house SOA-enabled, J2EE-based system dubbed, Payment Management.

After a relatively uneventful development period, one-time credit card processing rolled out smoothly in September 2010. Recurrent credit card payments and real-time ACH transactions followed in March 2011.

Then, in mid-2011, a disruption in FTNI's services resulted in a brief outage for Physicians Mutual. FTNI tracked the issue to a third-party partner and took corrective measures. Consequently, Moeller says, his company is "satisfied with the assurances that FTNI has provided."

Up-Front ROI

Yet the hiccup pales in comparison to the rewards, which started with approximately $250,000 in savings for up-front infrastructure costs and 3,500 hours of development effort, according to Moeller. "And we reduced this phase of our PCI-compliance efforts by about four months," he adds.

On the customer-facing side, FTNI works with credit card companies to update card expiration information before a recurring payment is processed, preventing coverage interruptions due to an expired card, Moeller notes. "And for us, it reduces internal inefficiencies caused when a payment attempt is made to an expired card," he says.

Not surprisingly, card and ACH transactions have soared. "From March through October 2011 we exceeded credit card volume over the entire year in 2010," Moeller reports. "Also, over the same period, we processed $4 million in electronic payments through the enhanced self-service capability enabled by FTNI. And we're getting a higher persistency of customers who use recurring payments."

More recently, Physicians Mutual efficiently insourced the previously outsourced administration of a particular product. Prior to FTNI, a complex process for scanning checks and posting to legacy systems would have required considerable IT and business resources to develop, Moeller explains. "FTNI provided us with an easy way to automate because we leveraged a very similar process that existed for credit cards," he says.

The FTNI deployment also contributed to a new policy administration system rollout scheduled for Jan. 1, 2012. And it will be leveraged during the 2012 adoption of e-wallet functionality. "Not only do we feel good about our partnership with FTNI," says Moeller, "but due to the reduced security and compliance burdens, we sleep better at night."